AP
Business Highlights
Tuesday July 15, 7:13 pm ET

Downturn accelerates as inflation roars ahead

WASHINGTON (AP) -- The U.S. economic picture worsened Tuesday, with a report of the highest inflation since the early 1980s, more bad news for banks and automakers and a suggestion by the Federal Reserve chief that worse days are ahead.

The Labor Department said wholesale inflation, driven by skyrocketing gas and food costs, rose by 9.2 percent for the 12 months ending in June -- the fastest pace since the summer of 1981, during another energy crunch.

At the same time, consumers hit the brakes hard despite a massive infusion of government stimulus checks. Retail sales turned in their poorest showing in four months.

Federal Reserve Chairman Ben Bernanke delivered a somber midyear outlook to Congress, saying the U.S. faces "numerous difficulties" despite the Fed's interest rate-cutting campaign, which began last September in hopes of preventing a recession.

Stocks end mostly lower

NEW YORK (AP) -- Wall Street ended a whipsaw day mostly lower, as fears of escalating instability in the financial sector kept investors on edge despite a steep retreat in oil. The Dow Jones industrials on Tuesday had their first close below 11,000 since July 2006.

Shares of Fannie Mae and Freddie Mac -- which together hold or back nearly half of all the nation's mortgages -- tumbled again.

The stock market did benefit from some bargain-hunting as oil retreated from its near-record levels, but the uncertainty of the financial sector made that recovery hard to sustain. If oil prices stabilize or retreat, consumers might feel more comfortable spending on discretionary items, and in turn help the economy.

Paulson sees mortgage assistance as backup

WASHINGTON (AP) -- Treasury Secretary Henry Paulson said Tuesday the Bush administration has no immediate plans to extend emergency loans to mortgage giants Fannie Mae and Freddie Mac or to purchase the stock of the two companies.

Paulson told the Senate Banking Committee that the assistance plan put together by the administration and the Federal Reserve over the weekend was intended to serve as a backup if needed.

Oil prices plummet more than $6

NEW YORK (AP) -- Oil prices fell harder than they have in 17 years Tuesday as fears that record fuel prices are spreading broad economic pain exacerbated the third big sell-off in just over a week.

Light, sweet crude plunged $6.44, or 4.4 percent, to settle at $138.74 a barrel in an extremely volatile session. Prices at one point plummeted more than $10 from the day's high.

Mounting concerns about the risks inflation poses to the United States, the world's biggest oil consumer, helped spark the declines. Analysts also attributed the sell-off to Thursday's expiration of options contracts and program trading.

The drop marked the biggest decline in dollar terms since the Gulf War. Even so, prices remain no lower than they were a week ago.

GM to cut salaried workers, production, dividend

DETROIT (AP) -- General Motors Corp. said Tuesday it will lay off salaried workers, cut truck production, suspend its dividend and borrow $2 billion to $3 billion to weather a severe downturn in the U.S. market.

GM said the moves will raise $15 billion to help cover losses and turn around its North American operations, including $10 billion from internal cost-cutting and $5 billion from selling some assets and borrowing against others.

GM's shares fell as much as 6 percent to a new 54-year low of $8.81, then rebounded to close at $9.84, up 46 cents, or 4.9 percent.

GM wants to reduce its total salaried costs in the U.S. and Canada by more than 20 percent. A large chunk of the reduction would come from cutting health care benefits for salaried retirees over age 65. Those people would get a pension increase from the company's overfunded pension fund to help compensate for Medicare and supplemental insurance.

Intel 2Q profit jumps 25 percent, beats estimates

SAN FRANCISCO (AP) -- Intel Corp.'s second-quarter profit jumped 25 percent as booming sales of laptop chips helped the company cruise past Wall Street's estimates Tuesday.

Investors viewed the chip maker's favorable results as a sign that global PC demand is healthy despite a sputtering U.S. economy. CEO Paul Otellini said demand for Intel's chips remains strong globally. Three-quarters of Intel's business is outside the U.S.

Intel earned $1.6 billion, or 28 cents per share, in the quarter, 3 cents above analyst's forecasts and well above the $1.28 billion, or 22 cents per share, figure a year ago.

P&G's chief marketer retires

CINCINNATI (AP) -- The marketing chief who directed about $8 billion a year advertising products such as Tide detergent, Crest toothpaste and Gillette shavers is stepping down, Procter & Gamble Co. said Tuesday.

Global marketing officer Jim Stengel, 53, will retire from the company -- the nation's biggest advertiser -- in October after 25 years.

P&G said Marc Pritchard, 48, will take over global marketing on Aug. 1. Pritchard is 26-year company veteran who is currently president for strategy, productivity and growth. He previously was president for global strategy and before that, headed P&G's global cosmetics business.

YouTube, Viacom agree to mask viewer data

NEW YORK (AP) -- In a nod to privacy complaints, Viacom Inc. won't be told the identities of individuals who watch video clips on the popular video-sharing site YouTube.

Viacom and other copyright holders have agreed to let YouTube mask user IDs and Internet addresses when Google Inc.'s online video site hands over viewership records in a $1 billion lawsuit accusing YouTube of enabling copyright infringement.

A federal judge ordered the database produced in a July 1 ruling widely criticized by privacy activists.

By The Associated Press

The Dow fell 92.65, or 0.84 percent, to 10,962.54. It was the blue chips' lowest close since July 21, 2006; the high price of oil is one of the major reasons the Dow has been trading at nearly two-year lows.

Broader stock indicators ended mixed. The Standard & Poor's 500 index fell 13.39, or 1.09 percent, to 1,214.91, while the Nasdaq composite index rose 2.84, or 0.13 percent, to 2,215.71.

Light, sweet crude plunged $6.44, or 4.4 percent, to settle at $138.74 a barrel in an extremely volatile session. Prices at one point plummeted more than $10 from the day's high.

In other Nymex trading, heating oil futures fell 14.59 cents to settle at $3.919 a gallon, while gasoline futures tumbled 17.29 cents to settle at $3.3848 a gallon. Natural gas dropped 48.2 cents to settle at $11.477 per 1,000 cubic feet.

In London, August Brent crude fell $5.17 to settle at $138.75 a barrel on the ICE Futures exchange.